Mutual Fund News

Canadians plow into funds

An estimated $910-million invested last month despite continued market turmoil

By SHIRLEY WON

Wednesday, February 4, 2009

FUNDS REPORTER

Canadian investors stashed an estimated $910-million into mutual funds in January - the first month of the key RRSP season - despite continued stock market turmoil.

It was the first month of net inflows in the industry since last August, but the new cash was parked in safe money market funds, according to the Investment Funds Institute of Canada (IFIC).

"Maybe people think the worst is over," said independent fund analyst Peter Loach said in an interview yesterday. "There is relative stability in the TSX [composite index] - it's hovering in the 8,000-range.

"For those people who haven't redeemed, maybe they think it's too late to redeem, and they simply want to get their RRSP tax slip."

An estimated $660-million to $1.16-billion flowed into mutual funds last month, IFIC estimated. The worst month for net redemptions was October when about $8-billion left the industry.

The net flows came as stock markets sank deeper into the red. The S&P/TSX composite index lost 3.3 per cent, while the benchmark S&P 500 index fell 8.6 per cent.

Frank Hracs, a senior economist with Toronto-based Credo Consulting Inc., noted that the net sales of money market funds was concentrated at one firm - RBC Asset Management Inc. - so it does not "not reflect any flight to liquidity or crisis mentality to start the year.

"Gradually the psychology is getting better ... but it is still weak," Mr. Hracs said. "They [investors] are not buying - it's just that they are not redeeming as much. But it's the first step in recovery for demand. ... It's still going to be a feeble RRSP season."

The new tax-free savings accounts introduced in January could also be an incentive for investors to plow money back into mutual funds, observers suggest. The market downturn has also played out at fund companies through rising layoffs. Fidelity Investments Canada, which posted net sales of $24-million in January, gave pink slips to around 50 to 60 employees yesterday, according to industry sources.

Fidelity spokesman Chris Pepper acknowledged there were layoffs, but refused to confirm any numbers.

"In the wake of the unprecedented events of recent months, Fidelity ... has decided to implement expense reduction activities," Mr. Pepper said in an e-mail. "These actions are critical to ensure our company remains financially strong."

Since December, however, the IFIC statistics no longer include CI Financial Corp., which has opted to no longer submit data to the industry group. Even though CI was not a member of IFIC, it did provide numbers to the organization, which only counts mutual fund sales.

CI Financial, which does not break out sales of its segregated funds from mutual funds, reported net redemptions of $97-million for January. Excluding one institutional account that had $219-million in net redemptions, CI had net sales of $122-million.

Last month, RBC Asset Management was the leader in net sales, attracting $1.25-billion.

*****

How the top 12 fund companies fared in January

Total net assets

Total net sales{Dagger}

of mutual funds

of mutual funds

RBC

$91,230

$1,250

RBC Asset Management Inc.

$75,894

$1,457

Phillips Hager & North Ltd.

$15,336

- $207

IGM Financial Inc.

$81,093

- $34

Investors Group

$45,659

$39

Mackenzie Financial

$34,003

- $103

Counsel Group of Funds

$1,431

$30

CI Financial Corp.

$2,199

- $97

TD Asset Management

$45,507

- $104

CIBC Asset Management

$40,893

$19

Fidelity Investments Canada ULC

$32,705

$23

BMO Financial Group

$28,699

- $58

BMO Investments Inc.

$25,073

- $50

Guardian Group of Funds Ltd.

$3,626

- $8

Invesco Trimark Ltd.5

$26,924

- $221

AGF Management Ltd.

$18,926

- $260

Franklin Templeton Investments

$17,696

$86

Dynamic Mutual Funds

$16,548

$81

ScotiaSecurities Inc.

$16,052

$47

*CI Financial is not a member of IFIC. Figures include segregated and mutual funds;

RBC asset Management and Phillips Hager & North are now grouped under RBC,